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Synopsis of Dissertation On WORKING CAPITAL MANAGEMENT AT

DCM SHRIRAM INDUSTRIES LTD.
SUBMITTED UNDER PARTIAL FULFILLMENT OF THE REQUIREMENT FOR AWARD OF MASTER OF PHILOSOPHY (Commerce)

Submitted by: Megha Gupta 80183912100074
Guided by: S.N. Kapoor (CA)

Submitted to

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RATIONAL FOR THE STUDY
Working capital may be regarded as life blood of a business. Working capital management is a process of planning and controlling the level and mix of the current assets of the firm as well as financing these assets. A study of working capital is of major importance to internal and external analysis because of its close relationship with the dayto-day operation of a business. Even in a well-established business with a long history of successful operation, careful attention to the management of working capital results in greater profitability. Funds which are needed for short term purpose for the day-to-day expenses are known as working capital.

The goal of working capital management is to manage each of the firm’s current assets and current liabilities. Working capital is also known as circulating capital or current capital or revolving capital.

Working capital is that part of company’s capital which is used for purchasing raw material and involve in sundry debtors. We all know that current assets are very important for proper working of fixed assets. Suppose, if you have invested your money to purchase machines of company and if you have not any more money to buy raw material, then your machinery will no use for any production without raw material. From this example, you can understand that working capital is very useful for operating any business organization. We can also take one more liquid item of current assets that is cash. If you don’t have cash in hand, then you cannot pay for different expenses of company, and at that time your many business works may delay for not paying certain

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expenses. If we define working capital in very simple form, then we can say that working capital is the excess of current assets over current liabilities.

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Importance of working capital:
Main advantage of maintaining adequate amount of working capital are follows Solvency of the business, company goodwill, easy loan from bank, cash discount on raw material purchase, regular supply of raw material, regular payment of salaries, wages and other day to day commitments, Exploitation of favorable market condition, ability to face crisis, quick and regular return on investment, high morale.

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BRIEF COMPANY PROFILE
Delhi cloth General Mills Ltd. and as it was then known (Later : DCM Ltd.) was incorporated in 1887 by a group of North Indian Business man to setup a textile mills at Bara Hindu Roa Delhi. The initial start was slow till 1905 when Sir Shriram Join the group DCM Shriram Industries Limited (DSIL) is an India-based company. The Group has operations in sugar, alcohol, fine chemicals, rayon tyrecord, and textiles. The company has five manufacturing units in India. Daurala Sugar works is located at Daurala, UP where Sugar, Refined sugar, Pharma Grade Sugar, Alcohol, Potable Liquor and Aromatic Chemicals are manufactured. Products like Industrial Rayon, Nylon and Chemicals are manufactred at Shriram Rayons, Kota, Rajasthan. Daurala Organics manufactures Drug Intermediates and Fine Chemicals. DCM Hyundai Ltd and Daurala Food and Beverages (P) Ltd are Shriram's promoted companies. DCM Hyundai Ltd located at Pollivakkam, Tamil Nadu manufactures Dry Cargo Marine Freight Containers, Freight Containers for Trucks and Sheet and metal fabrications and Daurala F and B (P) Ltd is manufacturer of Scotch and Blended Whickies and Liqueurs. Daurala Organics Ltd is promoted by DCM Shriram Industries Ltd. In 1991 and are engaged to manufacture high technology, high value drug intermediates. (a) BOARD OF DIRECTORS Tilak Dhar D. C. Mittal N. K. Jain Chairman of the Board, Managing Director President Chief Financial Officer

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Anil Gujral P. V. Bakre B. P. Khandelwal

Chief Executive Officer - Chemicals & Alcohol Senior Vice President Senior Executive Director, Company Secretary, Compliance Officer Whole-Time Director Deputy Managing Director, Director Director - Sugar Operations, Director Chief Operating Officer - Rayons

Madhav B. Shriram Alok B. Shriram G. Kumar K. N. Rao

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ORGANIZATION CHART SIR SHRIRAM (FOUNDER)

MURLI DHAR

BHARAT RAM

CHARAT RAM

Dcm shriram consolidated ltd SBGI/blosee ds ltd DSCL esco(100% subsidiary)

DCM shriram indust ltd Daurala organics DCM hyundai

DCM ltd DCM financial services DCM benetton

SRF

SIEL Jay engg Usha international Shriram pistons

DCM is a part of DCM group which was incorporated in the year of 1889 and is engaged in manufacturing of engineering products and textiles. The different divisions of DCM group are engineering products, tolls and dyes, precision engineering, textiles and real estates. The company has its plants at Asron (Punjab), Hissar (Haryana) and New Delhi. DCM`s principal businesses constitute textiles, information technology and real estate.

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Objective of the project:
1. To ascertain the financial performance of DCM Shriram Industries Ltd..

2. To Study the financial statements and analyse the performance of DCM Shriram Industries Ltd..

3. To examine the liquidity position, profitability position, capital structure position, activity position and working capital management of DCM Shriram Industries Ltd..

4. To Study the types of Working Capital of DCM Shriram Industries Ltd..

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RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problems. It may be understood as a science of studying how research is done scientifically.

TYPE OF RESEARCH

DESCRIPTIVE RESEARCH:- It is a type of descriptive research because
in this research sample is taken out and to make statements about the population on the basis of the sample analysis.

Article I. SAMPLING DESIGN
In this research the sampling design will be as follows:-

Period of Study:- Data will be collected through Balance Sheets of financial yr of
2007-08 to 2011-2012

Research Design:
Descriptive Study: Collecting financial data of DCM Shriram Industries Ltd. carrying out fact finding investigation with adequate interpretation.

Sources of Data collections:
Secondary Data: Financial statements such as: 1. P& L Account, Balance Sheet etc. 2. Websites, General documents, Reference books from Library etc which are readily available. 9

Proposed Chapterization of the Project
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Bibliography Annexure Introduction Company Profile Objective of the Study Research Methodology Data Analysis Finding and Conclusion Suggestions

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BIBLIOGRAPHY Serial No Book Name WORKING CAPITAL MANAGEMENT: STRATEGIES AND TECHNIQUES Author

Publisher Prentice hall of India

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Bhattacharya Hrishikes

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Towards Better Working Capital Management Websites

Gopala Krishna Murthy G www.google.co.in www.dcmshriram.com

ICFAI

3

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Dissertation On WORKING CAPITAL MANAGEMENT AT

DCM SHRIRAM INDUSTRIES LTD.
SUBMITTED UNDER PARTIAL FULFILLMENT OF THE REQUIREMENT FOR AWARD OF MASTER OF PHILOSOPHY (Commerce)

Submitted by: Megha Gupta 80183912100074
Guided by: MR. S.N. Kapoor (CA)

Submitted to

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Student Declaration
I, Megha Gupta hereby declare that the research work presented in the summer training based project report entitled, WORKING CAPITAL MANAGEMENT AT DCM SHRIRAM INDUSTRIES LTD. for the partial fulfillment for the award of Master of Philosophy in Commerse from CMJ University is based on my research work. The Research report embodies the result of original work and studies carried out by me and the content of the project do not from the basis for the award of any other degree to me or to anybody else.

(Signature)

Date

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ACKNOWLEDGEMENT
First of all I would like to thank the Management at DCM Organics for giving me the opportunity to do Research in their esteemed organization. I express my thanks to all Finance executive whose able guidance and direction, I was able to give shape to my Research. I would also like to thank my guid Mr. S.N. Kapoor (CA) Their constant review and excellent suggestions throughout the project are highly commendable. I express my thanks to Director of Tulsi Academy, Meerut. My heartfelt thanks go to all the executives who helped me gain knowledge about the actual working and the processes involved in various departments.

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INDEX

Synopsis of Dissertation Dissertation Chapter 1: Company Profile Chapter2: Introduction to Topic Chapter 3: Research Methodology Chapter 4: Data Analysis Chapter 5: Findings and Suggestion Limitation Bibliography

1-11 12-104 17-40 41-53 54-57 59-96 97-102 103 104

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PART 1

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COMPANY PROFILE

1.1 Histosry - DCM Ltd 2004 - DCM Shriram Infrastructure Ltd. (DSIL) has become a subsidiary of another Subsidiary, DCM Shriram Credit and Investments Ltd. (DSCIL). Consequently DSIL has become a Subsidiary of DCM Shriram Consolidated Ltd. also. DSCIL and DSIL are closely held and unlisted companies.

-DCM Shriram Chairman elected as Deputy Chairman for CII (North) 2005 -Fenesta rolls out new range of window, door systems

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DCM Shriram Industries Limited (DSIL) is an India-based company. The Company has operations in sugar, alcohol, fine chemicals, rayon tyrecord, and textiles. The six manufacturing sites of the Company are Daurala Sugar Complex, Shriram Rayons, Daurala Organics Ltd., DCM Hyundai Ltd., Indital Tintoria Ltd. and DCM Remy Ltd. Daurala Sugar Complex comprises a cane sugar plant, distillery and an aromatic chemical unit. Shriram Rayons manufactures rayon tyre cord with nylon and rayon conversion facilities catering to the needs of both domestic and overseas markets. Daurala Organics is engaged in manufacturing of drug intermediates. Indital Tintoria is focused on processing 100% cotton yarn. DCM Remy is engaged in the production of liquors and DCM Hyundai is engaged in the production of shipping containers.

A series of ISO 9000 certified DCM Shriram Industries Ltd was formed in 1990 after the restructuring of DCM group by combining five units of DCM group namely Sugar factory at Daurala, Distillery at Daural, Rayon tyre cord plant at Kota, Liquor Operations at Daurala and Aromatic Chemicals Plant at Daurala. The company is essentially a manufacturer of Sugar, Alcohol, Chemicals and Rayons. The company has five manufacturing units in India. Daurala Sugar works is located at Daurala, UP where Sugar, Refined sugar, Pharma Grade Sugar, Alcohol, Potable Liquor and Aromatic Chemicals are manufactured. Products like Industrial Rayon, Nylon and Chemicals are manufactred at Shriram Rayons, Kota, Rajasthan. Daurala Organics manufactures Drug Intermediates and Fine Chemicals. DCM Hyundai Ltd and Daurala Food and Beverages (P) Ltd are

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Shriram's promoted companies. DCM Hyundai Ltd located at Pollivakkam, Tamil Nadu manufactures Dry Cargo Marine Freight Containers, Freight Containers for Trucks and Sheet and metal fabrications and Daurala F and B (P) Ltd is manufacturer of Scotch and Blended Whickies and Liqueurs.

The company had promoted ISO 9002 certified Daurala Organics Ltd in 1994 to manufacture high technology, high value drug intermediates.

Under a Scheme of Arrangement approved by the shareholders and creditors of the Company and also by the Hon'ble Delhi High Court vide their Order dated 164-90 the Company (DCM Ltd) now stands divided into four companies’ w.e.f. 14-90 as follows: i) DCM Limited ii) DCM Shriram Industires Ltd iii) DCM Shriram Consolidated Ltd iv) Shriram Industrial Enterprises Ltd

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(a) BOARD OF DIRECTORS Tilak Dhar D. C. Mittal N. K. Jain Anil Gujral P. V. Bakre B. P. Khandelwal Chairman of the Board, Managing Director President Chief Financial Officer Chief Executive Officer - Chemicals & Alcohol Senior Vice President Senior Executive Director, Company Secretary, Compliance Officer Whole-Time Director Deputy Managing Director, Director Director - Sugar Operations, Director Chief Operating Officer - Rayons

Madhav B. Shriram Alok B. Shriram G. Kumar K. N. Rao

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1.2(b) ORGANIZATION CHART SIR SHRIRAM (FOUNDER)

MURLI DHAR BANSI DHAR SHRI DHAR

BHARAT RAM VINAY/VI VEK ARUN

CHARAT RAM

SIDDHART/DEE PAK SRF DCM shriram indust ltd Daurala organics DCM hyundai SIEL Jay engg Usha international Shriram pistons

Dcm shriram consolidated ltd SBGI/blosee ds ltd DSCL esco(100% subsidiary)

DCM ltd DCM financial services DCM benetton

1.3 History of DCM Shriram Industries Ltd. Under a 'Scheme of Arrangement' approved by shareholders & creditors of Comp. & also by Honourable Delhi High Court vide their Order dated 16-4-90 the Comp. [DCM Ltd] now stands divided into four companies w.e.f. 1-4-90 as follows :

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[1] DCM Limited [2] DCM Shriram Industires Ltd [3] DCM Shriram Consolidated Ltd [4] Shriram Industrial Enterprises Ltd

As per the scheme, the shareholders of DCM Ltd. will be allotted shares in DCM Shriram Industries limited & Shriram Industrial Enterprises limited in the ratio of one share in each of above Companies for every four shares held by then in DCM Ltd. as on 21-9-1990. Pursuant to the scheme three units namely. Daurala Sugar Works, Shriram Rayons & Hindon River Mills have been vested with the Company. 2000 - Credit rating agency has retained the MD rating, indicating default to the fixed deposit programme of company. 2001- The Board of Directors of Comp. has approved as under : 1. Hiving off of its Polymer Processing Business on a going concern basis to its 91% subsidiary DCM Shriram Exports Ltd. - The communication issued to the BSE, DCM Shriram Industries Ltd has informed that Shri D.C.Mittal, Joint Managing Director has demitted office on December 11, 2001 - DCM Shriram Industries Ltd has informed that the Board of Directors of Comp. at its meeting held on January 14, 2008, has co-opted Shri. S B Mathur on the Board as an Additional Director. He will be an independent director. -DCM Shriram Industries Ltd has re-appointed Shri Alok B Shriram as Dy. Managing Director for further period of 5 years w.e.f. October 01, 2008.

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DCM is a part of DCM group which was incorporated in the year of 1889 and is engaged in manufacturing of engineering products and textiles. The different divisions of DCM group are engineering products, tolls and dyes, precision engineering, textiles and real estates. The company has its plants at Asron (Punjab), Hissar (Haryana) and New Delhi. DCM`s principal businesses constitute textiles, information technology and real estate. DCM basically has three different divisions Textiles, Information Technology and Real Estate. Its Textiles division is a Spinning Mill located in Hisar (Haryana) engaged in the manufacturing of 100% grey cotton yarn and Melange yarn in the count range of 14`s to 40's, for usage in knitting fabrics and weaving of terry towels. The unit has a line of new generation machines from renowned manufacturers like M/s. schlafhorst A.G (Germany), Rieter (Germany), Crosrol (UK), Laxmi Machine Works (India) among others. The company's IT division was established in 1972 with its head office in Gurgaon and a branch in CA, USA and four branches in Delhi, Kolkata, Mumbai, Chennai and Hyderabad. Its service range includes Enterprise System Management Services, Customer Support Services, Embedded System Software for Automobiles and Embedded System Software for Wireless.

1.3 (a) Introduction of DCM Shriram Industries Ltd.

DCM Shriram Industries Ltd. (DSIL) is the flagship company of the DCM Shriram Industrial Group based predominantly in Northern India with a

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portfolio of products comprising of sugar, alcohol, fine chemicals, rayon tyrecord & textiles. The group has a strong emphasis on technology and quality as also a strong commitment to environmental & social concerns.

1.3 (b) Quality Policy OF DCM Shriram Industries Ltd. DCM Shriram Group has inherited the precept of giving the customer "an extra inch" from its founder. The group has moved away from its one-time staple, textiles, but the precept remains. And it applies to product specifications and quality as much as to other aspects of business. 1.3 (c). QUALITY POLICY

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1.3 (d) About DCM Shriram Industries Ltd. For over a hundred years, the name DCM Shriram has been synonymous with Excellence, Quality, Integrity, Environmental consciousness and pioneering spirit. This is the legacy that DCM Shriram Industries Group

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- born in 1990 on restructuring of the erstwhile DCM Ltd - aspires to live up to & surpass. As a business group that has inherited the rich legacy of sound governance, effective corporate management, technological sophistication & above all the goodwill & loyalty of numerous stakeholders & associates, we continue to build our business on the vision & values endowed by our founder.

DCM Shriram Industries is a diversified group with operations in Sugar, Alcohol, Organic and Inorganic Chemicals, Drug Intermediates, Rayon Tyrecord, Shipping Containers and processed cotton yarn.

The group comprises five main business operations, each with a history of consistent performance over the years.

Daurala Sugar Complex, comprising a cane sugar plant, distillery and an aromatic chemicals unit. Shriram Rayons, comprising rayon tyre cord/yarn/fabric and nylon chafer/fabric plants. Daurala Organics, manufacturing new generation drug intermediates. Daurala Foods & Beverages (P) Ltd., manufacturing high-class liquors. DCM Hyundai Ltd., manufacturing shipping containers.

As a market-driven agglomerate, responsive to customer needs, DCM Shriram

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Industries group remains committed to continuous modernization, expansion, diversification and innovation.

It is a commitment that has helped us maintain leadership in every area of our operations. A tradition of excellence.

5. MILESTONE 1889 Delhi Cloth Mills founded at Delhi

1932 - Sugar factory set up at Daurala 1934 - Textile Mills set up at Lyallpur (Now Faisalabad in Pakistan) 1940 - Sugar factory set up at Mawana 1941 - Heavy inorganic chemicals plant set up at Delhi 1943 - Distillery set up at Daurala 1948 - New textile mills set up at Delhi 1958 - Spinning mills at Hissar and Silk mills set up at Delhi 1960 - PVC,Chlor-alkali and Calcium Carbide plant set up at Kota 1965 - Rayon tyrecord plant set up at Kota 1967 - Liquor operations started at Daurala 1969 - Urea plant set up at Kota 1970 - Aromatic chemicals plant set up at Daurala 1972 - Textile mills set up at Dasna - Computers unit set up at Delhi 1977 - Precision castings (for automobiles) foundry set up at Ropar 1990 - DCM restructured into 4 different groups

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1.3 (f) Birth of DCM Shriram industries Ltd.

1994 - Drug intermediates company established with works at Daurala (Daurala Organics Ltd.) - Yarn dyeing and processing unit established at Alwar (Indital Tintoria Ltd.) 1995 - Shipping containers company established at Chennai (DCM Hyundai Ltd.) 1997 - Joint Venture Liquor company established with works at Daurala (DCM Remy Ltd.) 2004 - Commercial production of Anhydrous Alcohol (for admixing field) 2005 - Daurala Organics Ltd. amalgamated with DCM

1.4 Corporate Ethos Enterprises of DCM SHRIRAM Group Endeavour to maintain leadership status by observing norms of excellence in all areas. 1.5 Quality Systems Highest degree of product specifications and quality standards is maintained by adopting world-class quality systems. ISO 9000 series certification has been received from RWTUV of Germany and Det Norsk Veritas of Norway.

1.5 (a) Research & Development Research & Development is a continuous process. Focus is on maintaining a technological edge through product

development, technology upgradation, energy conservation,

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pollution

control, of

optimisation environment.

of Close

resources, connection

and is

conservation

maintained with research institutions like the Shriram Institute for Indusatrial Research (SRIFIR), Shriram Cane Research Farm, and Shriram Test House.

1.5 (b) Environment Manufacturing units of the Group are like garden factories. Utmost attention is paid to treatment of effluents, control of pollution, and conservation of environment. This constitutes a specific target of R&D effort. 1.5 (c) Safety Safety of men, machines & materials has a high priority. One of the units, Shriram Rayons, has won the National Safety Award consecutively for 15 Yrs.

1.5 (c) Human Resource Emphasis is placed on worker-management partnership... Achieving corporate goals through the cooperation & dedication of all personnel... Motivating them by imparting a sense of involvement, caring & recognition. Human resource development, career planning & skill-up gradation are essential parts of the Group's mgmt. process. 1.5 (d) Quality Of Life

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Manufacturing Units

Place - Sugar -

Products Refined Sugar Pharma Grade Sugar Alcohol Potable Liquor Aromatic Chemicals

Daurala Sugar Works Daurala, U.P.

Shriram Rayons

Kota, Rajasthan.

- Industrial Rayon - Nylon - Chemicals - Drug Intermediates - Fine Chemicals - Dry Cargo Marine Freight Containers - Freight containers for Trucks - Sheet metal fabrications - Scotch & Blended Whiskies - Liqueurs

Daurala Organics DCM Hyundai Ltd.

Daurala, U.P. Pollivakkam, Tamil Nadu. Daurala, U.P.

Daurala F & B (P) Ltd.

1.7 Environment, Health & Safety DCM Shriram Industries Group has always been dedicated to meeting their responsibility towards protection of environment and conserving scarce natural resources. This has prompted us to adopt the following measures :


Boilers modified for multi-fuel arrangement and can be run on various renewable fuels, viz., biogases, rice-husk and eco-friendly bio-gas (methane).



Effective flue gas wet scrubbing system using in-house technologies to release pollution free flue gases.

 

ESP's Bio-methanation and secondary Plant set up to obtain eco-friendly bio-gas from distillery effluent, using in-house technologies.

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Effluent Treatment Plants set up in all factories to not only control discharge of pollutants within prescribed limit but also generates bio gas which is used as a clean fuel in the boilers

   

Green Belt in and around the factory and residential complexes. Minimizing energy and water consumption in processes. Yearly Plantation practice Newer technology are adopted to minimize consumption of energy and water in the complex



Bio compost plant provides eco-friendly manure to the farmers of the area

It is our policy to maintain the wholesomeness of the environment and preserve the ecosystem. 1.7 (a) Health & Safety

Health and safety of employees and the public is of paramount importance to us.
 

Shriram Rayons, has won the National Safety Award for 15 Yrs. Organize regular training programmed covering all aspects of safety and hazardous operations.



Assessment and elimination of potential hazards/risks to Safety, Health and the environment, supported by regular safety audits and timely implementation and maintenance of safety systems supported by periodic drills and rehearsals.

1.8 SOCIAL COMMITMENT

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Helping to improve the quality of life of our workers is very much a part of the basic management philosophy at DCM Shriram Industries.

Facilities like housing, education, medicare, family welfare, libraries and reading rooms, play grounds and cultural centres for employees and their families are provided at all our units.

Highlights

-

Workers' clubs equipped with reading room, sports room, gymnasium etc. to encourage social interaction.

-

In-house facilities for regular sports and cultural events at all units, to encourage participation by all employees and their families. - Organizing free family planning & welfare camps in rural areas in collaboration with the local administration on a

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regular basis.

-

Operating charitable hospitals for the workmen as well as people of the nearby villages.

- Maintaining green belts in and around manufacturing sites.

1.9 RURAL DEVELOPMET

The company believes in sustainable development and therefore perform its role in the development of the community in and around its units. Various programs are regularly undertaken for improving the living conditions of the people in the vicinity of our units Today, the DCM Shriram name is widely associated with education, health care and welfare activities.

DCM has build Building schools, hospitals, vocational and community centers. Connecting villages in the sugar factory area with metal led roads and providing other infrastructure such as street lights, solar lighting , culverts, etc. Organizing

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free family welfare and health camps. Conducting immunization drives. Popularizing and subsidizing biogas plants, smokeless chulhas and solar cookers to meet local energy requirements and protecting the environment. Adopting villages for community development. Providing subsidies to farmers for purchase of agricultural input.

1.10 Shriram Rayons has the following product range.

Rayon Products

Nylon Products

Chemical Products

RAYON PRODUCTS PRODUCT YARN 1220/1 D.TEX RAYON TYRE YARN 1840/1 D.TEX RAYON TYRE YARN 2440/1 D.TEX RAYON TYRE YARN 1840/1 D.TEX RAYON TYRE YARN (Yarn Package Specification) CORD : Made from above yarn to customer specification 1220/2 D.TEX RAYON TYRE CORD 1840/2 D.TEX RAYON TYRE CORD 2440/2 D.TEX RAYON TYRE CORD SUPER-II SUPER-II SUPER-II SUPER-II SUPER-II SUPER-II SUPER-II QUALITY

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1840/2 D.TEX RAYON TYRE CORD (Cord Package Specification)

SUPER-II

GREIGE FABRIC : Warp - Cord Linear Density of yarn Super-II Viscose Rayon 1220/2, 1840/2,1840/3,2440/2 and to customer specification RAYON TYRE CORD FABRIC (GREY) RAYON TYRE FABRIC GREY FABRIC PACKING SPECIFICATIONS(CONTAINERISED) RAYON TYRE FABRIC (GREY FABRIC PACKING SPECIFICATIONS) RAYON TYRE FABRIC DIPPED FABRIC PACKING SPECIFICATIONS (CONTAINERISED) 1840/1 D.TEX (1650/1 DENIER) DIPPED RAYON CHAFER FABRIC SUPER-II SUPER-II

SUPER-II SUPER-II

SUPER-II

R.F.L. Treated Fabric : We treat Greige Fabric of above Specifications or to customer requirement

NYLON PRODUCTS Square Woven Chafer Fabric Wicking and Non-wicking : Multi Filament Nylon 6 or Nylon 66 in Deniers 840 and 1260. To customer Specification. The Yarn for the chafer can also be sourced from customers approved yarn Vendor. 940/1 D.TEX (840/1 DENIER) DIPPED NYLON CHAFER FABRIC 1400/1 D.TEX_(1260/1 DENIER) DIPPED NYLON CHAFER FABRIC Tyre Cord Fabric To customer specifications in 840/2, 1260/2 And 1680/2 Deniers. 2/1880 D.TEX NYLON TYRE CORD FABRIC (GREY) 2/940 D.TEX NYLON TYRE CORD FABRIC (GREY) 2/1400 D.TEX NYLON TYRE CORD FABRIC (GREY) R.F.L.Treated fabric : We treat Grieg Fabric of above Specifications or to customer requirement

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CHEMICALS PRODUCT ANHYDROUS SODIUM SULPHATE ANHYDROUS SODIUM SULPHATE CARBON-DI-SULPHIDE QUALITY Coarse Grain Quality (CGQ) Normal Quality (NQ/NQA) As per specifications

PAST PERFORMANCE Despite a dismal performance, DCM Shriram Industries has substantially increased its investments in group companies. For the 18-month period ended September 1996, the company recorded an operating loss of Rs 5.68 crore compared with Rs 41.52 crore for the year ended March 1995. This is mainly due to the adverse conditions in the sugar industry and rising input costs. A sharp jump in interest burden has further affected profits at the gross level. Net loss stood at Rs 47.53 crore against a net profit of Rs 14.86 crore as on March 1995. In fact, the net loss would have been much higher. According to the auditor’s qualifications, capitalization of detention charges, concor charges, etc. amounting to Rs 7.77 crore are not directly attributable to the acquisition of fixed assets, and hence should not have been capitalized. As a result, the loss for the year has been understated by Rs 7.77 crore. The auditors were also unable to comment on the recoverability and consequential effect of a loan of Rs 1.28 crore. However, the loan is considered good by the management. Poor performance has not deterred DCM Shriram from investing in group companies. For the 18-month period ended September 1996, investments increased from Rs 22.17

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crore to Rs 46.79 crore. It should be noted that during the same period, the gross block increased by Rs 8.73 crore only. Investments in subsidiary companies DCM Shriram Leasing, Indital Tintoria and DCM Shriram International B V increased from Rs 4.31 crore to Rs 9.41 crore. Similarly,investment in group companies increased by Rs 23 crore. In fact, the company has invested Rs 10 crore in interest-free non-convertible debentures (face value Rs 100) of Daurala Organics. These debentures are to be redeemed at a premium of Rs 26 each on April 1998 (three years from the date of allotment), with an option to the company to surrender the debentures for redemption prior to the due date in which case no premium would be paid. This means that the company would be getting less than nine per cent annual yield on these loans. As if this was not enough, the company has given an advance of Rs 6.88 crore to the subsidiaries. Advance towards preliminary and pre-operative expenses incurred for DCM Remy was Rs 1.63 crore. The idea of giving loans is fine as long as the company has enough funds. In fact, DCM has increased its borrowings. As on September 1996, borrowings stood at Rs 244.18 crore, up 59 per cent from March 1995. Higher borrowings, which resulted in huge interest outgo, have already made a hole in DCMs pocket. The net interest cost rose from Rs 13.11 crore to Rs 48.43 crore. DCM has investments of Rs 3.47 crore (last year Rs 0.81 crore) in the subsidiary- Indital Tintoria (ITL). The amount due from this subsidiary is Rs 8.04 crore. DCM has also given a guarantee to financial institutions and banks for repayments amounting to Rs 8.79 crore. As on September 1996, ITL had an accumulated loss of Rs 8.34 crore and a net worth

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of Rs 4.45 crore. Can DCM recover the money in the near future? According to the annual report, the management is hopeful. Apart from a liberal attitude towards its group concerns, DCM has also revalued its assets. Of the total reserves of Rs 133.62 crores, revaluation reserves stands at Rs 76.43 crore 57 per cent of the total reserves.

1.12 RECENT DEVELOPMENT Mefcom Capital Markets, on behalf of HB Stockholdings, issued a public announcement to the shareholders of DCM Shriram Industries.HB Stockholdings made an open offer to the shareholders of DCM Shriram Industries to acquire up to 3.5 million fully paid up equity shares of Rs 10 each, representing 22.88% of fully paid-up equity share capital at a price of Rs 70 a share payable in cash. The portfolio management division has targeted to collect at least Rs 1,000 million for management under its schemes by the end of the year 2008. The management has set up a target to opening at least 50 branches/franchisees by March 2008 and scales it up to 100 branches by the end of the next year. The company has already set up eight one-stop multi-brand showrooms or Hariyali Kissan Bazars (as the company calls these stores) spread in over 8-10,000 sq ft area each for providing all solutions to the farmer community.

The company is going ahead with the plan of taking the total number to around 100 over the next 3-4 years with an investment ranging from Rs 60-lakh to Rs one crore each. The aim is to have multiple stores in each district within a radius of around 25-30 Km. 38

The company has also entered into a strategic alliance with Bharat Petroleum Corporation (BPCL) for setting up petrol or fuel pumps, which will be run by it. It is working on the philosophy that if a farmer comes for farming solutions, he needs diesel also for irrigation. The first such fuel station is expected be in operation before the end of this month.

Yet another step forward is a tie-up with ICICI Bank Limited on loans and funding for farmers

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PART II

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/

INTRODUCTION TO THE TOPIC

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INTRODUCTION TO THE TOPIC Finance is the lifeblood of a business. Working capital signifies funds required for day-to-day operation of the firm. As the world is fast developing it creates stiff competitions between countries in the form of economic development. Any country wants to survive must be very updating, hard working, innovative and quick reactor by forth effort immediately. Nowadays, hard working and updating of information is necessary to with stand in the competitive market. So for that comparison of our work system with other companies is a must. This research in working capital management helps to understand the utilization of the stock, work in progress, finished goods. It also furnishes the composition of current asset and current liabilities of the company. If the

company utilizes the working capital effectively it would become market leader in the world. Working capital management or short-term financial management is a significant facet of financial management. It is important due to two reasons:  Investment in current assets represents a substantial portion of total investment.  Investment in current assets and the level of current liabilities have to be geared quickly to changes in sales.

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Working capital involves activities such as arranging short-term finance, negotiating favorable credit terms, controlling the movement of cash, administrating accounts receivables, and monitoring the investment in inventories also take a great deal of time

DEFINITON The American Institute of Certified Public Accounts, USA has defined working capital as “the net working capital, represented by the excess of current assets over currently liabilities, identifies the relatively liquid portion of total enterprise capital which consist a margin of buffer for maturing obligation with the ordinary cycle of the business”.

CIRCULATING SYSTEM OF WORKING CAPITAL Working capital is also known as “circulating capital of current capital’. The use of terms circulating capital instead of working capital indicates that it flows is circular in nature. For every business enterprise, there will be flow of natural cycle of activities for its perpetual endowments. The funds is business are obtained from the issue of shares, debentures, and long-term arrangements and from business operation. A huge part of the funds is used for day-to-day operation of the business i.e., to pay wages and overhead expenses for the raw materials processed. This makes possible the stocking of finished goods by whose profits are generated.
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CONCEPT OF WORKING CAPITAL: 1. Gross Working Capital It is simply called working capital refers to the firm’s investment in current assets so the total current assets of the firm are known as gross working capital. 2. Net Working Capital It represents the difference between current assets and current liabilities. Net working capital may be positive or negative. Positive

net working capital is that when current assets are more than current liabilities. But when current liabilities become more than current assets than it is negative working capital.

TYPES OF WORKING CAPITAL: 1. Permanent Working Capital: As the operating cycle is a continuous process so the need for working capital also arises continuously. But the magnitude of current assets needed is not always same; it increases and decreases over time. However there is

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always a minimum level of current assets. This level is known as permanent or fixed working capital. 2. Temporary Working Capital: The extra working capital needed to support the changing production and sales activities, is called variable or functioning or temporary working capital.

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NEED FOR WORKING CAPITAL: The need for working capital cannot be overemphasized. The need of working capital arises due to the time gap between production and realization of cash from sales. So the working capital or investment in current assets becomes necessary need for working capital. It arises due to following reasons:-

OPERATING CYCLE “Operating cycle is the time duration requires for converting sales into cash after the conversion of resources into inventories.” First of all a firm purchase Raw Material, then after some processing it is converted into work–in–progress and after this further processing is done to convert work–in–progress in finished goods. After the raw material is converted into finished goods, sales are made. Sales are no always full cash sales; there are credit sales also. These credit sales after some period are converted into cash. So the whole process takes the time. This time taken is known as the length of operating cycle. So operating cycles includes:1. 2. 3. 4. Raw Material conversion period (RMCP) Work–in – progress conversion period (WIPCP) Finished goods conversion period (FCP) Debtors Conversion period (DCP)

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operating cycle :Raw Material

Work in Progress

Cash Collection from Debtors

Sales
Finished Goods

Credit Sales

Cash Sales

If the length of the operating cycle has short length period then less working capital is required. So working capital requirement is directly related with operating cycle. Operating cycle may be of two types 1. Gross Operating cycle 2. Net operating cycle 1. Gross Operating cycle

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Gross Operating cycle is the total time period from the conversion of Raw Material into finished goods and finished goods into sales and then sales into cash. GOC =RMCP + WIPCP + FCP + DCP 2. Net Operating Cycle As we provide period to debtors for the payments, our creditors also provide period to us for payment to them. So this reduces our requirement of working capital. This also affects the operating cycle. Operating cycle’s length reduces with so many days as provided by the creditors to us. The difference between gross operating cycle and period allowed by the creditors for payment is known as net operating cycle.

FACTORS INFLUENCING WORKING CAPITAL The need of working capital is not always the same it varies from year to year or even month. To month depending upon a number of factors. There is a set of rules or formulate to determine the working capital needs of the firm. In order to determine the proper amount of working capital of a concern, the following factors should be considered carefully.

1. Nature of business:

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The amount of working capital is basically related to the nature and volumes of business in concerns where the cost of the raw materials to be used in the manufacturing of a product is very large in proportion to its total cost of manufacturing the requirement of working capital will be very large.

2. Size of the business unit: The size of business unit has an important impact on its working capital needs. Size may be measured in terms of scale of operation. A firm with large scale of operation will need more working capital than a small firm. 3. Seasonal variation Seasonal industries require more working capital to stock the raw material during the season.

4. Time consumed in manufacturing: The average time taken in the process of manufacture is also an important factor in determining the amount of working capital. The longer the period of manufacturing the larger the inventory required. 5. Turnover of circulating capital: Rapidly of turnover determines the amount of working capital. The faster sales the larger the turnover hence less working capital 6 .Need to scope raw material and finished goods: the

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In industries where raw material are bulky and best purchase in large quantities such as cement of where labor stoppage is frequent large of working capital is required

7. Growth and expansion: Growing concern requires more working capital than those that are static. It is logical to expect larger amount old working capital in a growing concern to meant its growing need of funds.

8. Inventory turnover: With a better inventory control, a firm is able to reduce its working capital requirements. If the inventory turnover is high the working capital requirements will be low.

9. Dividend policy: Dividend policy and working capital are interrelated. Management view of current assets before declaring a dividend. takes a

10. Price level changes: Rising price level requires more working capital to maintain the same level of current assets.

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CONCEPT OF CASH MANAGEMENT Cash management is one of the key areas of working capital management. Cash is the most liquid current assets and is the common denominator to which all current assets can be reduced. This underlines the significance proportion of many firm’s assets, the efficient management of these funds could increase corporate earnings by millions. The goal of cash management is to reduce the amount of cash on hand, thereby increasing profitability, without reducing business activities of exposing the firm to under risk.

OBJECTIVES (1) To meet the cash disbursement needs. (2) To minimize funds committed to cash balances.

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CONCEPT OF RECEIVABLES MANAGEMENT Trade credit is considered as an marketing tool. It credits book debts or account receivable. A firm grants trade credit to protect its sales from the

competitors and to attract the potential customer too buys its products at favorable terms. Receivable constitute a substantial portion of current assets of several firms. The interval between the date of sale and the date payment has to be financed out of working capital. This necessitated the firm to get funds from banks or their sources. Thus trade debtors represent investment. As substantial amount are tied up in the trade debtors it needs careful; analysis and proper management.

INVENTORY MANAGEMENT The inventory management is to minimize the total costs of carrying and financing goods while providing full support to the marketing efforts of the firm. Inventory management like the management of other current assets should be related to overall object of the firm. Efficient management of inventory would ultimately results in the maximization of owner’s wealth. If the cash requirement have to be minimized inventory should be turned over ask quickly as possible, avoiding stock outs that might result in closing down the production line or lead to a loss of sales

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RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY PROBLEM OF STUDY

The study encompasses an analysis on financial position of DCM SHRIRAM INDUSTRIES LTD.. The study is performed in order to identify the problems and to provide some alternative solutions. It is helpful to the company to raise up their financial position.

In order to identify the financial position, we can analyze the financial statements of DCM SHRIRAM INDUSTRIES LTD.. It is a helpful tool to the management because by using this we can ascertain the financial strengths and weaknesses of the company.

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OBJECTIVES OF THE STUDY

 To analyze the working capital management of

DCM SHRIRAM

INDUSTRIES LTD.., for the period of five years from 2004-2005 to 2008-2009.  To study the structure and growth of working capital of the company and its impact on profitability.  To compare various working capital ratios for the study period.  To access the effectiveness of the company in managing the different elements of working capital.  To estimate the future working capital requirements.

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SCOPE OF THE STUDY The study is conducted at “DCM SHRIRAM INDUSTRIES LTD.” for 3 months duration. The study of Working capital management is purely based on secondary data and all the information is available within the company itself in the form of records. To get proper understanding of this concept, I have done the study of the balance sheets, profit and loss account’s, cash accounts, trial balance, cost sheets. I have also conducted the interviews with employees of accounts and finance department and stores department. So, scope of the study is limited up to the availability of official records and information provided by the employees. The study is supposed to be related to the period of last five years.

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RESEARCH DESIGN The research design followed to study the working capital management SRI SOWDESWARI SPNNING MILLS is Descriptive and Analytical Research Design. SOURCES OF DATA The data required for the study has been collected form the secondary sources. The relevant figures were taken from the annual reports, audited accounts, files, and manuals of finance department. ANALYTICAL TOOLS USED The analysis is carried on with the help the following financial statement analysis:  Schedule of changes in working capital  Ratio analysis  Management of working capital 1. Cash management 2. Receivable management 3. Inventory management.

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DATA ANALYSIS

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CHAPTER - IV ANALYSIS AND INTERPRETATION SCHEDULE OF CHANGES IN WORKING CAPITAL TABLE -1 STAEMENT OF CURRENT ASSETS AND CURRENT LIABILITIES FOR 2004 2005 PARTICULARS 2004 (Rs.in lakhs) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH & BANK BILLS RECEIVABLE CURRENT LIABILITIES CREDITORS BILLS PAYABLE 10315.04 326.57 8524.24 306.58 1242.28 753.62 197.62 854.50 858.64 1282.81 47.72 590.10 2005 (Rs.In lakhs)

SOURCE: SECONDARY DATA

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SCHEDULE OF CHANGES IN WORKING CAPITAL FOR 2004 – 2005

CHANGES IN WORKING PARTICULARS 2004 (in lakhs) 2005 (in lakhs) CAPITAL INCREASE (Rs.in lakhs) CURRENT ASSETS Inventories Sundry debtors Cash & Bank Bills receivable Total Current Asset CURRENT LIABILITIES Creditors Bills Payable Total Current Liability 10641.61 8830.82 10315.04 326.57 8524.24 306.58 1790.80 19.99 1242.28 753.62 197.62 854.50 3048.02 858.64 1282.81 47.72 590.10 2779.27 529.19 149.90 264.40 383.64 DECREASE (Rs.in lakhs)

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Working Capital Increase in Working Capital Total

7593.59

6051.55

1542.04 7593.59 7593.59 2339.98

1542.04 2339.98

INTERPRETATION:

 There is increase working capital of Rs.1542.04 lakhs due to decrease in current assets (i.e. inventories, cash &bank, bills receivable)  There is also increase in current assets (sundry debtors) and also decrease in current liability (creditors and bills payable).  Hence the net effect is increase in working capital.

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TABLE - 2 STATEMENT OF CURRENT ASSETS & LIABILITIES FOR 2005 & 2006 PARTICULARS 2005 (Rs.in lakhs) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH & BANK BILLS RECEIVABLE CURRENT LIABILITY CREDITORS BILLS PAYABLE 8524.24 306.58 7454.37 423.83 856.64 1282.81 47.72 590.10 978.30 1212.38 783.37 510.37 2006 (Rs.in lakhs)

SOURCE: SECONDARY DATA

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SCHEDULE OF CHANGES IN WORKING CAPITAL FOR 2007 -2008

PARTICULARS

2007 (in lakhs)

2008 (in lakhs)

CHANGES IN WORKING CAPITAL INCREASE (Rs.in lakhs) DECREASE (Rs.in lakhs)

CURRENT ASSETS

Inventories Sundry debtors Cash & Bank Loan and Advances Total Current Asset CURRENT LIABILITIES Creditors Bills Payable Total Current Liability Working Capital Increase in Working

1274.09 864.6 113.79 373.25 2625.19

1298.35 3180.09 783.37 344.89 5035.46 2315.49 735.65

29.74

30.36

8524.24 306.58

7454.37 423.83 -

1069.87

117.25

2047.43 6051.55

2796.44 4393.78 1657.77

749.01

1657.77

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Capital

Total

6051.55

6051.55

1925.18

1925.18

INTERPRETATION:

 There is a net working capital (1657.77) lakhs due to decrease in current assets(i.e. debtors, bills receivable)  There is also increase in current assets (inventories, cash and bank) and also decrease in current liability (creditors) and increase in (bills payable).  Hence the net effect is increase in working capital.

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TABLE - 3. STATEMENT OF CURRENT ASSETS & LIABILITIES FOR 2006 - 2007 PARTICULARS 2006 (Rs.in lakhs) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH & BANK BILLS RECEIVABLE CURRENT LIABILITY CREDITORS BILLS PAYABLE 7554.37 423.83 7948.11 503.30 978.30 1212.38 783.37 510.37 1149.21 1202.45 289.61 722.40 2007 (Rs.in lakhs)

SOURCE: SECONDARY DATA

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SCHEDULE OF CHANGES IN WORKING CAPITAL FOR 2006 -2007

PARTICULARS

2006 (in lakhs)

2007 (in lakhs)

CHANGES IN WORKING CAPITAL INCREASE (Rs.in lakhs) DECREASE (Rs.in lakhs)

CURRENT ASSETS Inventories Sundry debtors Cash & Bank Bills receivable Total Current Asset CURRENT LIABILITIES Creditors Bills Payable Total Current Liability Working Capital 7878.20 4393.78 8451.41 5087.74 7454.37 423.83 7948.11 503.3 493.74 79.47 978.3 1212.38 783.37 510.37 3484.42 1149.21 1202.45 289.61 722.4 3363.67 212.03 170.91 -9.93 493.76

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Decrease in Working Capital Total 693.96 5087.74 5087.74 693.96 1076.90 1076.90

INTERPRETATION:

 There is a net decrease working capital (693.96) lakhs due to decrease in current assets (i.e. debtors, cash &bank)  There is also increase in current assets (inventories, bills receivable) and also increase in current liability (creditors and bills payable).  Hence the net effect is decrease in working capital.

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TABLE - 4 STATEMENT OF CURRENT ASSETS & LIABILITIES FOR 2007 - 2008 PARTICULARS 2007 (Rs.in lakhs) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH & BANK BILLS RECEIVABLE CURRENT LIABILITY CREDITORS BILLS PAYABLE 7948.11 503.30 7835.02 441.04 1149.21 1202.45 289.61 722.40 1176.02 724.67 475.60 919.82 2008 (Rs.in lakhs)

SOURCE: SECONDARY DATA

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SCHEDULE OF CHANGES IN WORKING CAPITAL FOR 2007 -2008

PARTICULARS

2007 (in lakhs)

2008 (in lakhs)

CHANGES IN WORKING CAPITAL INCREASE (Rs.in lakhs) DECREASE (Rs.in lakhs)

CURRENT ASSETS Inventories Sundry debtors Cash & Bank Bills receivable Total Current Asset CURRENT LIABILITIES Creditors Bills Payable Total Current Liability Working Capital Increase in Working Capital 107.79 107.79 8451.41 5087.74 8276.06 4979.95 7948.11 503.30 7835.02 441.04 113.09 62.26 1149.21 1202.45 289.61 722.40 3363.67 1176.02 724.67 475.6 919.82 3296.11 185.99 197.42 26.81 477.78

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Total

5087.74

5087.74

585.57

585.57

INTERPRETATION:

 There is a net increase working capital (107.79) lakhs due to decrease in current assets(i.e. debtors) and also increase in current assets (inventories, cash & bank, bills receivable)  There is also decrease in current liability (creditors and bills payable).  Hence the net effect is increase in working capital.

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TABLE - .5 STATEMENT OF CURRENT ASSETS & LIABILITIES FOR 2008 & 2009 PARTICULARS 2008 (Rs.in lakhs) CURRENT ASSETS INVENTORIES SUNDRY DEBTORS CASH & BANK BILLS RECEIVABLE CURRENT LIABILITY CREDITORS BILLS PAYABLE 7835.02 441.04 7525.94 468.05 1176.02 724.67 475.60 919.82 1176.12 538.87 535.77 494.98 2009 (Rs.in lakhs)

SOURCE: SECONDARY DATA

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SCHEDULE OF CHANGES IN WORKING CAPITAL FOR 2008 -2009

CHANGES IN WORKING PARTICULARS 2008 (Rs. in lakhs) 2009 (Rs. in lakhs) INCREASE (Rs.in lakhs) CURRENT ASSETS Inventories Sundry debtors Cash & Bank Bills receivable Total Current Asset CURRENT LIABILITIES Creditors Bills Payable Total Current Liability Working Capital Decrease in Working Capital 7835.02 441.04 8276.06 4979.95 268.3 7525.94 468.05 7993.99 5248.25 268.30 309.08 27.01 1176.02 724.67 475.6 919.82 3296.11 1176.12 538.87 535.77 494.98 2745.74 60.17 424.84 0.10 185.80 DECREASE (Rs.in lakhs) CAPITAL

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Total INTERPRETATION:

5248.25

5248.25

637.65

637.65

 There is a net decrease working capital (268.30) lakhs due to decrease in current assets (i.e. debtors, bills receivable)  There is also increase in current assets (cash & bank) and also decrease in current liability (creditors) increase liability bills payable.  Hence the net effect is decrease in working capital.

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TABLE - .6 NET WORKING CAPITAL FOR LAST 5 YEARS YEAR NET WORKING CAPITAL

(Rs.in lakhs)

2007-08

501.16

2008-09

2116.42

2009-10

1165.66

2010-11

1320.12

2011-12

424.88

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CHART - 1 NET WORKING CAPITAL FOR LAST 5 YEARS

w.c
w.c 2116.42

1165.66

1320.12

501.16

424.88

2007-08

2008-09

2009-10

2010-11

2011-12

INTERPRETATION:  The net working capital of Daurala Organics . shows an increasing trend and later decreasing.  The main reason for the decreasing trend is due to the increasing creditors year after year.  It also indicate weak cash balance to meet the liabilities and every after year the current liability has been continuously increasing.

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TABLE - 7 RATIO ANALYSIS DEBTORS TURNOVER RATIO TABLE SHOWS CREDITSALES AND AVERAGE DEBTORS FROM 2005-2009 YEAR CREDIT SALES AVERAGE DEBTORS DEBTORS TURNOVER RATIO 2007-08 20741.11 641.405 32.33

2008-09

18652.01

606.19

30.00

2009-10

17452.36

601.225

29.00

2010-11

10200.29

362.335

28.15

2011-12

14200.29

269.435

45.28

SOURCE: SECONDARY DATA NET CREDIT SALES DEBTORS TURNOVER RATIO = --------------------------------------AVERAGE DEBTORS

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CHART - 2 DEBTORS TURNOVER RATIO

debtors turnover ratio
debtors turnover ratio 2116.42

1165.66

1320.12

501.16

424.88

2007-08

2008-09

2009-10

2010-11

2011-12

INTERPRETATION:

 In 2007-08, the debtors turnover ratio has been decreased due to market condition which promoted all manufactures to push sales through credit sales and after 2006, the debtors turnover ratio has been reducing. In 2009 it is higher i.e (45.28).  The turnover is high and shows that bulk of sales in cash.

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TABLE - 8 DEBT COLLECTION PERIOD TABLE SHOWS DAYS & DEBTORSTURNOVER RATIO FROM 2005 –2009 YEAR DAYS DEBTORS TURNOVER RATIO 2004-05 2005-06 2006-07 2007-08 2008-09 360 360 360 360 360 32.33 30 29 28.15 45.28 DEBT COLLECTION PERIOD 11.35 12 12.4 12.78 7.9

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SOURCE: SECONDARY DATA 360 DEBT COLLECTION PERIOD = ----------------------------------------DEBTORS TURNOVER RATIO

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CHART - 3. DEBT COLLECTION PERIOD

14 12 10 11.35 12

12.4

12.78

7.9 8 DEBT COLLECTION PERIOD 6 4 2 0 2004-05 2005-06 2006-07 2007-08 2008-09

INTERPRETATION:

 In 2007-08 , the debt collection period has been higher 12.78, it is due to market condition leads to decrease in debtors turnover ratio and debt collection period .  It is due to effective collection of debts from debtors.

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TABLE - 9 CURRENT RATIO TABLE SHOWS CURRENT ASSETS & CURRENT LIABILITY FROM 2007 -2012 YEAR CURRENT ASSETS 2007-08 2625.19 CURRENT LIABILITY 2124.03 CURRENT RATIO 1.23

2008-09

5035.46

2919.84

1.72

2009-10

3941.51

2775.84

1.41

2010-11

4312.57

2992.45

3.20

2011-12

3026.52

2601.64

1.16

SOURCE: SECONDARY DATA

CURRENT ASSETS CURRENT RATIO = --------------------------------CURRENT LIABILITY

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CHART - 4 CURRENT RATIO

w.c
w.c 3.2

1.72 1.23 1.41 1.16

2007-08

2008-09

2009-10

2010-11

2011-12

INTERPRETATION:

 The ideal current ratio is 2:1 OR 1.5 in year 2010-11 ration gone to 3.2 which is wrong. In other years the ratio remain near 1.5 show  This ratio shows company’s poor performance in working capital management.

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TABLE - 10 QUICK RATIO TABLE SHOWS QUICK ASSETS & CURRENT LIABILITY FROM 2007-2011 YEAR QUICK ASSETS CURRENT LIABILITY 2007-08 1350.29 2124.03 0.63 QUICK RATIO

2008-09

3787.11

2919.03

1.29

2009-10

2056.1

2775.84

0.74

2010-11

1841.68

2992.45

0.6

2011-12

1464.23

2601.64

0.56

SOURCE: SECONDARY DATA QUICK ASSETS QUICK RATIO = -----------------------------CURRENT LIABILITY

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CHART - 5 QUICK RATIO

quick ratio
quick ratio 1.29

0.74 0.63 0.6 0.56

2007-08

2008-09

2009-10

2010-11

2011-12

INTERPRETATION:

 The ideal quick ratio is 1:1 but in our organization it is fluctuating in all years.  This shows poor management of quick current assets.

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TABLE - 11 NET WORKING CAPITAL RATIO TABLE SHOWS SALES & WORKING CAPITAL FROM 2007 - 2011 YEAR SALES WORKING CAPITAL 2007-08 864.06 501.16 3.41 RATIO

2008-09

3180.09

2116.42

4.42

2009-10

1251.52

1165.66

2.39

2010-11

1222.32

1320.12

3.38

2011-12

861.17

424.88

3.50

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SOURCE: SECONDARY DATA

SALES NET WORKING CAPITAL RATIO = ------------------------------------WORKING CAPITAL

CHART - 6 NETWORKING CAPITAL RATIO

4.42 4.5 4 3.41 3.5 3 2.39 2.5 2 1.5 1 0.5 0 2004-05 2005-06 2006-07 2007-08 2008-09 RATIO 3.38 3.5

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INTERPRETATION:

 The chart shows the ratio of sales to working capital.  The ratio was highest in 2005-06 at 4.42 times due to smaller increase in current liabilities thereby reducing the working capital requirements.  In later years the firm has seen a decrease in the rate of turnover due to considerable decrease in current liabilities.

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TABLE - 12 MANAGEMANT OF WORKING CAPITAL CASH MANAGEMENT CASH TO CURRENT ASSETS RATIO TABLE SHOWS CASH TO CURRENT ASSETS FROM 2005 - 2009 YEAR CASH CURRENT ASSETS 2004-05 2005-06 2006-07 2007-08 2008-09 47.72 783.37 289.61 475.60 535.77 2779.27 3484.42 3363.67 3296.11 2745.74 1.71 2.24 8.60 14.42 19.51 RATIO

SOURCE: SECONDARY DATE CASH CASH TO CURRENT ASSETS RATIO = ------------------------------CURRENT ASSETS

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CHART - 7 CASH TO CURRENT ASSETS
25 19.51

20 14.42

15

RATIO 10 8.6

5 1.71 0 2004-05 2005-06 2006-07 2007-08 2008-09 2.24

INTERPRETATION:

 The above chat shows the cash holding in relation cash to total current asset.

 The cash been holding had been lowest in 1.71in 2004-05.

 Hence the cash position is weak in 2005.it is increasing from the year 200506 onwards.

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TABLE - 13 CASH TURN OVER RATIO

TABLE SHOWS SALES TO CASH FROM 2005 - 2009 YEAR 2004-05 2005-06 2006-07 2007-08 2008-09 SALES 20652.01 19452.36 12200.29 16200.29 18400.37 CASH 47.72 783.37 289.61 475.60 535.77 RATIO 432 25 42 35 34

SOURCE: SECONDARY DATA SALES CASH TURN OVER RATIO = -----------------------------CASH

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CHART - 8 CASH TURN OVER RATIO

500 450 400 350 300 250 200 150 100 50 0 2004-05 2005-06 2006-07 2007-08 2008-09 25 42 35 34 RATIO 432

INTERPRETATION:

 The above chart shows that the ratio of sales to cash balance of the company over a period of study.  This ratio is highest in the 2004-05  .Cash turnover ratio fluctuating in other four years.

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TABLE - 14 RECEIVABLE MANAGEMENT DEBTORS TO CURRENT ASSETS RATIO TABLE SHOWS DEBTORS &CURRENT ASSETS FROM 2005-2009 YEAR DEBTORS CURRENT ASSETS 2004-05 2005-06 2006-07 2007-08 2008-09 1282.81 1212.38 1202.45 724.67 538.87 2779.27 3484.42 3363.67 3296.11 2745.74 46.15 34.79 35.74 21.98 19.62 RATIO

SOURCE: SECONDARY DATA DEBTORS DEBORS TO CURRENT ASSETS RATIO = ------------------------CURRENT ASSETS *100

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CHART - 9 TABLE SHOWS DEBTORS TO CURRENT ASSEST
50 45 40 35 30 25 20 15 10 5 0 2004-05 2005-06 2006-07 2007-08 2008-09 21.98 19.62 RATIO 34.79 35.74 46.15

INTERPRETATION:

 The above chart shows the investment in debtors in relation to current assets. This ratio is highest in the year 2004-05.  This ratio is fluctuating in other four years.  It source weak in debtor’s management.

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TABLE – 15 INVENTORY MANAGEMENT INVENTORY TO CURRENT ASSETS RATIO TABLE SHOWS INVENTORIES & CURRENT ASSETS FROM 2005 - 2009 YEAR INVENTORIES CURRENT ASSETS 2004-05 2005-06 2006-07 2007-08 2008-09 858.64 978.30 1149.21 1176.02 1176.12 2779.27 3484.42 3363.67 3296.11 2745.74 30.89 28.09 34.16 35.67 42.83 RATIO

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SOURCE: SECONDARY DATA INVENTORIES INVENTORY TO CURRENT ASSETS RATIO = -------------------------------- * 100 CURRENT ASSETS

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CHART - 10 INVENTORY TO CURRENT ASSETS RATIO

45 40 35 30 25 20 15 10 5 0 2004-05 2005-06 2006-07 2007-08 34.16 30.89 28.09 35.67

42.83

RATIO

2008-09

INTERPRETATION

 The above chart shows the percentage of inventory investment in Current assets.  The investment in inventory is the highest during 2008-09 at 42.83%.  It can be interpreted that the firm holds more than 50% of the investment in current assets in the form of inventory during the period of study i.e., 20052009.

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FINDING CONCLUSION SUGGESTION

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FINDINGS SUGGESTIONS AND CONCLUSION 1. The net working capital high in 2004-05 during the study period. But later it will keep on decreasing it is because of increase current liability may lead to negative net working capital (CA-CL). 2. The Debtor Turnover Ratio decreasing but later increasing highly in 2008-09 (45.28 times) during the study period due to bulk of sales in 3. The Debt-collection Period is high in 2007-08(i.e. 12.7 days) it is due to market condition leads to decrease in debtors turnover ratio and debt collection period. 4. The company has a lesser current ratio from last five years. It is less than the ideal ratio of 2:1 due to more credit sales. 5. The quick ratio is less than the ideal ratio of 1:1 during this study period 2004 to 2009. 6. The working capital turnover ratio has been higher in 2005-06 at (4.42 times) .but later decreasing due to smaller increase in current liability there by reducing their working capital requirements 7. Cash to current assets is lowest in 2004-05 (1.71).Hence the cash position is weak, but later it will keep on increase cash to current assets.

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8. The cash turnover ratio is highest in 2004-05 (4.32).later it will cash turnover ratio fluctuating in other years. 9. The debtor to current assets ratio is high in the year 2004-05.but later it will decreasing due to weak in debtors management. 10. The inventories to current assets ratio is fluctuating during the study period.

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SUGGESTIONS  The company should concentrate to maintain the liquidity position on cash balance and try to mobilize the funds from banks or other financial institutions. The company has to take proper decision to maintain the current assets and current liabilities.

 The liquidity position of the company is very low, therefore, the company should take more long term funds or the company should reduce the dependence on current liability.

 The solvency position of the company is very low, therefore the company should depend on alternative source of fund or any other financial institution.. ,  The networking capital shown negative trend for the last five years, it is because of increase current liability. Therefore the company should go for cash sales, it will help to more cash purchase so, it will reduce the sundry creditors and increase in current assets, it may result in positive net working capital but it will take for a long period of time

 The company should take additional working capital in terms of long term funds and from other financial institutions and the company should take

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proper decisions that the major sales be on cash sales. This will leads to increase the inventory, debtors, cash and bank balances, (all current assets). this will lead to decrease in current liability and finally the working capital shows the positive trend.

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CONCLUSION

The result of the study clearly brings out the relative inefficiency of the company with regard to working capital. The financial performance of the company is very low in each department. The result of the study is restricted to those six years only. The important factor which is worth mentioning here is that the company has to use the resources as the effective as to improve the financial position of the company.

The recommendations have been put forward to management for its consideration. Even though the recommendation done based on the projection of the historical data available in the books of accounts, the management has to take effort to implement the necessary steps by looking into the financial performance of the previous year. A successful financial executive is interested not in maintaining good current ratio but an adjustable account of current assets, so that the business may operate smoothly.. thus the working capital concept is more important to the management in order to maintain the current assets and current liabilities.

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LIMITATIONS OF THE STUDY  As central purchase office purchase raw material and central marketing make sales. So more detailed information cannot be received about these.  Cash from debtors are collected by the corporate office through commission agents. So efforts for collection of debtors cannot be clearly known from DCM SHRIRAM INDUSTRIES LTD..  Investment of funds are also made by corporate office, so it becomes difficult to know that how much investment is made in different ways for continuous availability of funds.

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BIBLIOGRAPHY
PANDEY I.M. - FINANCIAL MANAGEMENT PUBLISHING IUSE PUT LTD,2000 - NEW DELHI, VIKAS

KHAN. M AND JAI P.K. – FINANCIAL ACCOUNTING , NEW DELHI, TATA MEGRAW HILL PUBLISHING COMPANY LTD – 2000, 3RD EDITION MAHESWARI S.N – PRINCIPLES OF MANAGEMENT ACCOUNTING – NEW DELHI –SULTAN CHAND & SONS,-2001.

WEB ADDRESS:

WWW.FINANCIALEXPRESS.COM

WWW. SHRIRAMINDUSTRIES.COM

WWW.dcm.COM.

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